What’s the Difference Between Bitcoin and Ethereum?
Since its launch in 2009, cryptocurrency has risen to be a viable investment vehicle, with many companies tapping into new customer bases by accepting crypto as a form of payment.
According to Daniel Ives, an equities analyst from Wedbush Securities, the recent frenzy over Bitcoin “is not a fad…but rather the start of a new age on the digital currency front.”
In this article, we’ll take a closer look at two of the most popular forms of cryptocurrency: Bitcoin and Ethereum. What’s the difference between the two? To answer that question, you’ll first have to understand more about the world of cryptocurrency.
What is Cryptocurrency?
One of the more helpful analogies used to explain cryptocurrency is that of the casino chip. A casino chip is nothing more than a piece of plastic, though it can be exchanged for real currency within the confines of the casino that distributes them.
Cryptocurrency works the same way. These digital “coins” can be exchanged for real-world dollars.
The Difference Between Bitcoin and Ethereum
Bitcoin was launched in 2009. Satoshi Nakamoto wanted to introduce a form of currency that operated outside of any centralized authority, which made it totally different from the currencies issued by national governments.
Ethereum launched in 2015. It utilizes blockchain technology to create smart contracts, as well as decentralized applications (called “dapps”) that can be built and run without oversight.
Thus, the greatest difference between Ethereum and Bitcoin lies in the overall aims of each. While Bitcoin was created as its own monetary system, Ethereum exists to facilitate contracts and decentralized applications.
Ethereum was created to complement—not compete with—Bitcoin, though in the years since its inception both companies have emerged as competitors on cryptocurrency exchanges.
We can also highlight other differences between these two platforms:
- Ethereum transactions may contain executable code
- Data connected with Bitcoin transactions are used for notetaking only
- Ethereum transactions are faster than Bitcoin
- Each company uses a different algorithm to complete transactions
These differences, however, are relatively technical. However, another crucial practical difference lies in the relative value of Ethereum versus Bitcoin. As of August of 2021, Bitcoin’s market cap falls at $872 billion. Ethereum, by contrast, has a market cap of $377 billion, which means that Bitcoin’s market cap is more than 2.5 times larger than Ethereum.
An Alternative Cryptocurrency Investment Strategy
Concern over the instability of cryptocurrency is not notional. Since these currencies are not regulated by governmental agencies, values have fluctuated widely. Investors may therefore be seeking more reliable investment alternatives.
In April of 2021, Coinbase (COIN) became the first cryptocurrency to go public. This gives prospective investors the chance to invest in cryptocurrency without the risk, since they’d be investing in a company with a traditional infrastructure and a measurable cash flow.
As other cryptocurrency companies follow suit, investors will have access to greater options when it comes to investments in cryptocurrency.